Purchase 2 Pay Optimization

P2P Optimization - Problem, Solution & Impact

Problem

• P2P causes serious troubles with businesses and suppliers - it forces procurement, requesters and finance to spend up to 50% of their capacity with unnecassary work

Solution

• Deloitte will quickly find process improvements through the use of a high performance data mining tool
• Deloitte will provide expertise and proven best practice soltuions to build a best-in-class process 

Impact

• Process improvements will lead up to 50% resources reduction 
• EBIT will increase by 5% through better payment terms
• Smooth processes will remove a constant "pain in the neck"

A lot to gain

Our everyday project experiences in companies operating in various industries show that the purchase to pay process is a pressure point, which is worth to fix!

Typical issues to eliminate are

• Efficiency killers absorb huge capacity
• Poor Performance leads to conflicts
• Profit Improvements become imperative
• Compliance gives CFO/CPO sleepless nights

In particular, companies have to execute manual effort due to unnecessary rework. This is caused by unclear responsibilities and an incomplete P2P process design, which disrupt the process. Perturbations are aggravated when companies are not keeping up with digitalization (i.e. insufficient automation of purchase order and invoice processing). Deloitte’s success stories have proven that our approach can free up resources absorbed by manual work by up to 30% in operational procurement and by up to 50% in accounts payable.

Another obvious problem might be poor performance, which is expressed by both massive supplier complaints regarding late payments (external) and unnecessary accounts payable workflows (internal), which create significant manual efforts and dissatisfaction. Deloitte managed to increase the attractiveness as a buyer as well as the negotiation positioning due to improved supplier satisfaction. This is coupled with increased user happiness by a smooth process and the removal of constant painful frictions.

Across industries, profit Improvements become imperative (e.g. Deloitte’s Global CPO survey 2017 showed that 79% of survey participants named cost reduction as the main procurement aim). Unused profitability potential might stem from two areas: existing discount agreements not fully leveraged and DPO rate not actively managed/optimized (e.g. payment cycles not synchronized). In many projects our procurement and negotiation expertise generated EBIT-effects of up to 5% by increasing the cash discount rate to the benchmark level of 25% and significant CF-effects by moving the DPO rate to a benchmark level of 50 days.

Last but not least, compliance might give CFO/CPO sleepless nights, since oftentimes basic compliance rules are not fully implemented in P2P processes and no compliance tracking system is established (e.g. malus system). Our P2P optimization approach eliminates risk of fraud and non-compliant supplier relationships and secures a process with transparency on defined process steps.